Analytical CRM: The fusion of data and intelligence

A good deal has been written about customer relationship management (CRM), one-to-one marketing and event-driven marketing, and the dramatic potential of these strategies is reasonably clear to all. However, the deployment of the necessary information systems to realize the marketing nirvana of genuine customer-centered enterprises is still a good way off. There is one single overwhelming reason why progress is slow: data is not being harnessed with anything like the degree of sophistication that technology allows. It may even be, from a casual observation of the enterprises that trumpet a CRM strategy, that many fundamentally misunderstand the concept. For a customer-centered strategy to be successful we need to comprehensively understand customer behavior and responsiveness. This, in turn, will allow us to understand customer life cycle, customer loyalty, customer risk, customer profitability and customer segmentation. From here we may proceed to a corporate strategy based on this intelligence; a strategy that will undoubtedly precipitate a radical overhaul of business processes and culture. The systems associated with this customer discovery process are termed ‘analytical CRM’, in contrast to the operational CRM systems that are deployed in a call center to handle the interaction with the customer. Many enterprises have invested heavily in the infrastructure for operational CRM (call center technology, funnel management systems, campaign management technology, loyalty cards) without having any coherent strategy for analytical CRM. The result is that they are well positioned to deal with individual customer interactions but hopelessly blind to the history and pattern of customer transactions over time. The outcome is, generally, disappointing and predictable. The source of failure can be located in the contradiction of attempting to deal with customers as distinct individuals without retaining a corporate memory of those individuals.

The CRM elixir

Many commentators and consultants in the field of marketing are busily selling business executive with the necessity for CRM. Very often, what is not adequately explained are the steps that are required to transition a mass-marketing culture to a business environment for one-to-one marketing. It is even rarer to hear, on the business speaking circuit, any insight into the complexity of the information architecture that must first be created in order to realize the vision of mass customized selling. The net result is an expectation on the part of many business executives that one-to-one marketing is simply a fashionable business strategy rather than a radically revised business process.

One-to-one marketing is a radically revised business process.

The test of a business that has genuinely embraced CRM is whether the focus of the business has moved from product to customer. In the traditional business model the critical issue was if the product (which was perceived as tangible and stable) could be sold to customers (who were perceived to be spectral and fickle). The mass customization revolution turns this assumption on its head. The CRM enterprise makes it most significant investment in the customer, and products become simply things that need to be devised and sourced in response to customer needs. When an enterprise invests time, money and resources into understanding customer behavior it quickly becomes apparent that the customer is a far more stable anchor for the business than are products.

The customer is a far more stable anchor for the business than are products.

The days when we could regard customers are a renewable resource that could always be depended on to exhibit a Pavlovian response to stimuli of price and convenience have all but disappeared.

So, what does our experience of analyzing information about customers tell us?

  • First, each customer is unique and there is no such thing as a typical customer or even typical profiles that might be convertible into segments (which rules out focus groups, statistical sampling or geodemographic profiling as adequate techniques to understand or anticipate customer behavior).
  • Secondly, customers expect the supplier enterprise to retain a memory of their transactions and are enraged by organizations that repeatedly ask them for the same information. (How many of us get asked every time we check into the same hotel chain if we want a non-smoking room? … We grit our teeth and tell them for the umpteenth time, knowing they will discard this information as soon as we check out.)
  • Thirdly, the most attractive product that consumers want to buy is time. (Why trudge around a supermarket putting the same branded products in your trolley each week when your grocer could do it for you?)
  • And finally, customer behavior is totally predictable. Every customer action (whether it represents a threat or opportunity for the enterprise) is preceded by telltale warning signs hidden in the mass of data.

What is also apparent is that customers clearly understand the potential of technology much better than do many business leaders. When you had a customer a loyalty card you immediately create the expectation in the mind of the customer that you are now going to study their behavior. That is the implicit contract that is created with the customer. In the process of accepting the card they permit their behavior to be scrutinized. In return they expect the supplier to do something intelligent with the information. The same principle applies to call centers and electronic commerce. Once the customer realizes that he or she is not an anonymous shopper, they lose all patience with being treated like one. Which is why playing with CRM is dangerous. Trapping individual customer events in an environment where the data are subsequently discarded, hopelessly fragmented or intact but unanalyzed is a recipe for customer disillusionment on a grand scale.


Key analytical CRM applications


Sales analysis

Integrated perspective on sales

The sales analysis application provides an analysis of sales by different dimensions, including sales by channel/outlet or organizational unit; sales by product, product category or product group; sales by region; sales by season; cross-selling; up-selling; sales by customer, customer segment or customer demographics; an analysis of the characteristics of customers who purchase particular products; and an analysis of the mix of products sold. This application offers the organization an integrated perspective on sales and enables the sales function to understand the underlying trends and patterns in the sales data.

Customer profile analysis

Facilitates the building of genuine customer relationships.

This application allows the organization to distinguish in the mass of customers the individual customer as well as the many micro-segments that make up the whole. Increasingly customer segmentation is forming an essential element of marketing strategy as markets become more fragmented and customer segments exhibit distinct and different characteristics. This application facilitates the building of genuine customer relationships in the era of one-to-one marketing. Customer profile analysis includes an analysis of both households and individual customers. The analysis includes profiling by product utilization and frequency; by product holding pattern; by demographic characteristics; by psychographic characteristics; and by geographic characteristics.

Campaign analysis

A key part of the learning process that enables the transition from mass marketing to mass customization.

Being able to target customers accurately in campaigns and promotions and being able to analyze the response to a promotion episode are key parts of the learning process that enables the transition from mass marketing to mass customization. Most organizations launch many different kinds of promotional campaign for many different products in many different media. This application enhances the organization’s understanding of the entire process, from selecting those customer to be targeted to analyzing how they responded. It is clearly an analytical application and is necessary prerequisite for any operational software packages designed to manage the campaign episode itself. The campaign analysis application includes an analysis of both households and individual customers, and an analysis of customers whoa re highly responsive to campaigns; it compares the characteristics of those customers who are highly unresponsive and the characteristics of customers who have opted to be excluded from campaigns; and it provides the ability to measure the effectiveness of individual campaigns and the effectiveness of different media, and to conduct cost-benefit analyses of campaigns.

Loyalty analysis

Loyalty analysis measures and monitors customer loyalty and facilitates customer retention

One of the keys to profitability in any enterprise is customer loyalty. Yet few organizations measure customer loyalty in a structured way or seek to understand the underlying causes of customer attrition. This application is designed to do just that. The loyalty analysis of application measures customer loyalty with reference to the duration of the customer relationship; the range of services and products consumed by the customer; the frequency of purchases by the customer; the characteristics of loyal and disloyal customers; the rate of customer attrition; the extent of customer attrition; seasonal and cyclical factors that impact on customer attrition; the demographic, psychographic and geographic influences on customer attrition; and the attrition rates of customer in respect of individual products. By itself the loyalty analysis application measures and monitors customer loyalty and facilitates the development of customer retention programs. When combined with the full suite of applications the loyalty of customer can be assessed in the context of their value, their contact history, the segments they belong to and individual transaction events that may influence their loyalty.

Customer contact analysis

Analyzing customer contracts is an essential ingredient in maintaining the nurturing customer relationships.

Customers interact with organizations in many ways using different touch-points to initiate inquiries, makes complaints, tender compliments, provide feedback, reports faults or make suggestions. This information provides valuable insights into the behavior of the customer and the track record of the organization servicing the customer. Identifying the likely level of satisfaction or dissatisfaction of a customer can be clearly seen in the customer contact history of that individual. This application provides the capability to analyze the customer contact history of individual customers and study resolved and unresolved complaints; the number of positive and negative contacts; the time taken to resolve customer complaints and inquiries; and the response of customers to these interactions. Analyzing customer contacts is an essential ingredient in maintaining and nurturing customer relationships and preserving the loyalty of customers into the future.

Profitability analysis

Essential to understand profitability in all its dimensions.

In any organization it is essential to understand profitability in order to be able to determine pricing, award discounts, allocate resources or develop strategy. But profitability is a many-faceted concept and can be considered in the context of an organization, an asset, a channel, a product, a product category, a brand, a customer or a customer segment. In addition to these dimensions of profit most organizations will wish to measure gross profits, net profits and margins. To measure and analyze the many different dimensions of profitability is the objectivity of this application.


What the present state of the CRM marketplace demonstrates is that there is a missing link, and that link is analytical CRM. Operational CRM systems are well developed and are now deployed in many organizations to handle campaigns and customer interactions. But very often this capability allows the enterprise to achieve no more than more sophisticated mass marketing. And real breakthroughs cannot be achieved in establishing customer relationship until the mass-marketing paradigm is broken. Simply being able to observe customer responses to campaigns merely measures the success of that campaign. It does not tell you if it was the right campaign. And clearly it provides no basis for one-to-one marketing.  The source of intelligence for segmentation, targeting and the pursuit of one-to-one marketing lies in the fragmented mass pf customer interactions that are captured on the many different operational systems. Insights into customer behavior cannot be derived solely from the interactions they have with the company call center but are betrayed by the behavior that can be discerned from the billing systems, the account management systems, the electronic point-of-sale systems, the financial systems and the administrative systems of enterprise. Until these data are harnessed, the marketing department is still flying blind. Undeniably, harnessing these data is a greater challenge than simply deploying a system to manage the campaign and sales process. Until a business can predict future loyalty and profitability it has no basis for really managing the business.

Customers increasingly have a very clear understanding of what constitutes a relationship.

Equating sales force automation or campaign management with CRM is naïve and will, ultimately, alienate customers who, increasingly, have a very clear understanding of what constitutes a relationship.

Every company in every business sphere must make its own choice depending on its business strategy, marketing goals, and brand positioning. The choice is not about picking one of the two, but rather about finding the right solution that will provide the best results for your business. Besides, a mobile strategy can reasonably include both a mobile website and an app.


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